Mortgage payments to fall by 25 PER CENT despite new interest rate hike in huge boost for home owners

Mortgage rates could drop by a quarter in just months
Mortgage rates could drop by a quarter in just months
Yui Mok
Dan Falvey

By Dan Falvey

Published: 03/02/2023

- 12:25

Updated: 03/02/2023

- 16:39

Interest rates were hiked up by 0.5 per cent to a base rate of four per cent yesterday

Monthly mortgage payments have been predicted to drop significantly over the next 11 months despite interest rates continuing to be hiked up.

Wealth management firm Quilter believes mortgage rates could drop to four per cent by the end of 2023, down from a high of as much as six per cent last autumn.

The good news for property owners comes despite the Bank of England increasing interest rates yesterday in a bid to curb inflation.

Andrew Bailey, Governor of the Bank of England, during the Bank of England Monetary Policy Report Press Conference, at the Bank of England, London, following the decision to raise interest rates to 4% from 3.5%. Picture date: Thursday February 2, 2023.
Andrew Bailey and the bank of England agreed to increase rates yesterday
Yui Mok

Rates were hiked up by 0.5 per cent to give a base rate of four per cent.


Karen Noye, mortgage expert at Quilter said: "Inflation is still incredibly high and people’s buying power has taken a real hit as a result, particularly with rising energy bills, but thankfully we look to now be moving past the peak.

"Lower inflation should mean interest rates stabilise and even start to drop with mortgage rates following suit.

"This could result in mortgage rates dropping to 4.0 per cent by the end of the year and potentially even lower in the future which will have a real impact on monthly mortgage costs, particularly for those on variable rate mortgages, and could see more people considering buying a new home as the prospect becomes more affordable.

"The last few years have shown just how unpredictable the housing market really is, but with hope we are now out the other side of what has been a hugely turbulent few years and we will gradually see a levelling out in terms of rising costs."

Higher interest rates have led to predictions from some market experts that house prices will fall significantly in the coming months.

However, Noye highlighted that it was important not to make sweeping generalisations about the property market.

She said that regional factors meant it was impossible to give a general picture of the whole UK.

File photo dated 31/03/16 of a general view of houses in south London, as London has been the most searched-for area among Britain's home buyers in 2022, according to data from a property website, amid signs that some housing market trends are heading back towards the pre-pandemic era.
Regional inequalities mean London has been less impacted by rate increases than other areas
Dominic Lipinski

The wealth expert said: “On a regional basis, some have been hit much harder by rising house prices and subsequent mortgage costs than others.

"The North West of England has seen the most significant rise in monthly payments, while those in London have seen the smallest rise in terms of percentage increase, but are still left paying huge mortgage bills as the costs were already so high.

"However, there is no guarantee that the changes in the housing market will materialise in the way that has been predicted."

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